Correlation Between Valley National and Merchants Marine

Can any of the company-specific risk be diversified away by investing in both Valley National and Merchants Marine at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Valley National and Merchants Marine into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Valley National Bancorp and Merchants Marine Bancorp, you can compare the effects of market volatilities on Valley National and Merchants Marine and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Valley National with a short position of Merchants Marine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valley National and Merchants Marine.

Diversification Opportunities for Valley National and Merchants Marine

0.31

Correlation Coefficient

Valley National  Merchants Marine

Weak diversification

The 3 months correlation between Valley and Merchants is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Valley National Bancorp and Merchants Marine Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Marine Bancorp and Valley National is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Valley National Bancorp are associated (or correlated) with Merchants Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants Marine Bancorp has no effect on the direction of Valley National i.e., Valley National and Merchants Marine go up and down completely randomly.

Pair Corralation between Valley National and Merchants Marine

Assuming the 90 days horizon Valley National Bancorp is expected to generate 0.47 times more return on investment than Merchants Marine. However, Valley National Bancorp is 2.11 times less risky than Merchants Marine. It trades about 0.06 of its potential returns per unit of risk. Merchants Marine Bancorp is currently generating about 0.0 per unit of risk. If you would invest  2,458  in Valley National Bancorp on September 4, 2024 and sell it today you would earn a total of  66.00  from holding Valley National Bancorp or generate 2.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Valley National Bancorp  vs.  Merchants Marine Bancorp

Valley National Bancorp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Valley National Bancorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Valley National is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Merchants Marine Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merchants Marine Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Merchants Marine is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Valley National and Merchants Marine

The main advantage of trading using opposite Valley National and Merchants Marine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valley National position performs unexpectedly, Merchants Marine can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Merchants Marine will offset losses from the drop in Merchants Marine's long position.

The idea behind Valley National Bancorp and Merchants Marine Bancorp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.